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Once again, we're forced to find comfort in "core" inflation measures. This morning's Producer Price Index (PPI) released from the Bureau of Labor Statistics offers both salve and fresh pain.

The PPI for finished goods jumped 1.4% in May, according to the U.S. Department of Labor, well ahead of the 1% expectation jawboned by pundits over the past week. That puts wholesale inflation at 7.2% for the year. Ouch!

The good news, if you can call it that, is that core inflation - that is, excluding the fast-rising costs of food and energy - ran just as expected, up 0.2% in May. Core inflation has, in fact, moderated from the 0.4% level attained in April. I feel better knowing that, don't you? After all, the predictability of core CPI inflation was taken as a sign of hope last week, wasn't it?

Most troubling, though, is the widening spread between the crude goods and the finished goods indexes. The inflation in raw materials prices is far and away more vicious than that of finished goods, which are fashioned from them. May's figures indicate that there's an increasing lot of inflation still being absorbed by manufacturers and processors, telltale of the dearth of pricing power commanded by these firms.

This is a pernicious condition, too (see chart below). The erosion in pricing power started at the bottom of the last recession, but really accelerated when the mortgage credit mess started spattering industry with red ink.

Two things can come of this: Companies either choke to death, or - to save themselves - they attempt to raise prices quickly to make up for all that lost time.

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